Tullow’s Kenya prospects get even better

Tullow Oil plc announced a fifth oil discovery in Kenya’s Lokichar Basin last week, less than a month after protests against an influx of outside workers in the area forced the company to suspend its drilling operations there.

Having reached a deal with Kenyan government and local leaders, Tullow resumed drilling and its Agete-1 well promptly struck oil “with an estimated 100 metres of net oil pay in good quality sandstone reservoirs.”

The new find highlights “emerging world class exploration and production potential” in northern Kenya according to Angus McCoss, Tullow’s Exploration Director.

Investment analysts quoted in financial media say it now seems likely that the Lokichar Basin contains at least 500 million barrels of oil.

This is only one of the rift basins that Tullow and other oil companies are licenced to explore in Kenya.

Tullow is also drilling in Ethiopia’s South Omo region, just north of the border with Kenya’s Lake Turkana.

The scale and progress of these operations make it increasingly probable that Kenya, and perhaps Ethiopia, will join Uganda as an East African onshore oil producer.

A quarterly operations update from Africa Oil, which has a 50% share in the Kenyan Blocks 10BB and 13T where Tullow is drilling, notes confidently that the companies may work with the government on a “‘start-up phase’ oil production system with potential to deliver significant production rates with oil export via road or rail in advance of a full-scale pipeline development.”

Ugandans fearing that Kenya will overtake Uganda in a ‘race for oil’ may, however, take comfort from a report that Tullow recently published, Creating Shared Prosperity in Uganda.

Tullow’s General Manager in Uganda, Jimmy Mugerwa, there states that “Uganda’s stage of industry development is more mature than that of Kenya, Democratic Republic of the Congo and Tanzania. Uganda’s time has come, and it currently has a first mover advantage to compete for the investment and technical expertise that will be required to develop the region.”

Mugerwa warns, however that the Government of Uganda “will need to act decisively and efficiently in order to maintain that advantage.”